Introduction to DeFi and Dex

We’re so proud of you for deciding to take this course. You have now completed three courses in the Sui learning path and this is going to be your fourth course. 🎊 You are now equipped with all the basic knowledge of the Sui blockchain. In this lesson, we will explore what DeFi is, how Sui helps build DeFi applications, and what features our DeFi application will have.

Introducing DeFi applications

So, imagine if your money didn't need traditional banks or financial big-shots. That's what DeFi does. Instead of relying on the usual suspects, it lets regular folks like you and me do financial stuff directly with each other. There are no middlemen, just peer-to-peer power.

How does DeFi work?

Here's the scoop on how DeFi works:

1. DeFi operates on blockchain technology, ensuring secure and immutable transactions through digital blocks.
2. DeFi bypasses traditional intermediaries like banks, offering lower fees and higher interest rates by facilitating direct peer-to-peer transactions.
3. User-friendly applications facilitate DeFi activities such as lending, borrowing, and trading, making financial interactions accessible to all.
4. Leveraging blockchain, DeFi transcends geographical barriers, allowing seamless financial interactions worldwide.

Goals of DeFi

• Accessibility: Anyone with an internet connection can interact with a DeFi protocol.
• Security and Transparency: Everything's on the blockchain, so it's super secure, and transactions are open for all to see without revealing who you are.
• Autonomy: DeFi doesn't need big banks. It's like the rebel leader of finance, doing its thing without the need for central control.

Remember, while DeFi doesn't give you complete anonymity, it's all about changing the financial game for the better.

DeFi on Sui

Let’s discuss what role Sui plays in DeFi applications and why they are reliable platforms for DeFi creation.

• Leverages a novel consensus mechanism for efficient and stable transactions, catering to simple and complex DeFi operations.
• Implements parallel execution to execute transactions simultaneously, eliminating delays and ensuring smooth DeFi interactions.
• Introduces storage fund tokenomics, revolutionizing blockchain storage costs and maintaining fair fees, thus creating a well-organized digital ecosystem for DeFi

What is a decentralized exchange?

A decentralized exchange (often abbreviated as DEX) is a type of cryptocurrency exchange that operates without a central authority or intermediary. Instead of relying on a centralized platform to facilitate trades and hold users' funds, DEXs use smart contracts or other decentralized protocols to enable peer-to-peer trading directly between users.

We all would have used Metamask at a certain point and you would have held some tokens. Now, if you want to swap your token for another token, you will need an exchange who can do that. There are two ways to go about it - Centralized exchange and Decentralized Exchange.

A traditional or centralized exchange is like a bank: it holds your tokens and manages the trades. But just as a bank can be a target for thieves, centralized exchanges can be vulnerable to hacks or misuse. But with decentralized exchange, you can swap your tokens without any centralized entity but the set of rules governed by smart contracts.

Advantages of decentralized exchanges

1. Security: Users retain control of their private keys and funds, reducing the risk of centralized exchange hacks or thefts.
2. Privacy: Users can trade directly with one another without the need for intermediaries.
3. Censorship Resistance: Decentralized exchanges are generally more censorship-resistant since they don't rely on centralized servers or authorities.
4. Interoperability: Some decentralized exchanges can facilitate trading between different blockchain platforms or assets.

That’s a wrap

In a nutshell, Move and Sui Move create the ultimate DeFi HQ. Move's asset-friendly design meets Sui's scalability and low-cost storage, offering a sweet spot for real-time, low-latency trading in the DeFi realm. Next, we will start building and setting up our development environment.